1. Field of the Invention
The present invention relates to sales plans, and, more particularly, to strategic and tactical sales plans for multiple products offerings with differing price classes contingent on different possible realizations of uncertain demands.
2. Description of the Related Art
Consider the following pricing problem arising in the marketplace. The seller has multiple product offerings belonging to two or more price classes (e.g., First, Business, and Economy fare classes for an airline company) to sell in a marketplace where the demand for each product in each prices class in each time period is uncertain. Every product is manufactured only after a bid for the product is accepted by the seller (e.g., assembling components to build a personal computer). The products require multiple resources (e.g., hard disks, memory modules, etc.) which are constrained for the planning time horizon. There may be a minimum requirement (dictated, for example, by possible Service Level Agreements) on meeting a pre-specified portion of the actual demand for each time period.
In such a situation, the seller is challenged with the tactical decision of whether to accept a bid in a current time period, with the overall objective of the seller being maximization of revenue over the planning horizon. While accepting the bid now might jeopardize the seller's chances of meeting unknown future demands, rejecting the bid may mean leaving money on the table. Thus, it is imperative that the seller must hedge against all future uncertainties to arrive at an optimal bid acceptance decision for the current time period.
A classical application for such an approach is in the PC industry where the time to assemble a PC is relatively short compared to the long lead-times for supplies of PC components. A common scenario that is encountered in the PC industry is that a bulk of the orders (for any quarter, for example) are realized in the last two to three weeks of the quarter. Because the lead time for at least some of the components in the bill-of-materials for a PC may be well over three weeks, it follows that the company has to operate in the last few (and possibly most critical) weeks in accordance with an inventory constrained sales plan. Because well over 50% of a company's revenue may be materialized in this operating mode, optimizing revenue for this setting could be critical for a company.
Revenue management is now practiced routinely in industries with perishable inventory such as airlines, car rentals, hotels, etc. However, current inventory allocation techniques are static and do not consider demand uncertainties explicitly in a sales plan. As a result, the current inventory allocation techniques do not provide a recourse action if the demand realizations are significantly different from the forecast. This could result in a significant detriment on the expected revenue.
Therefore, a need exists for a system and method that develops strategic and tactical sales plans for multiple products offerings with differing price classes contingent on different possible realizations of uncertain demand. The system and method should allocate constrained inventory across different price classes and explicitly consider uncertainty in the demand.